HEALTH INSURANCE IN SWITZERLAND: A
CLOSER LOOK AT A SYSTEM OFTEN OFFERED
AS A MODEL FOR THE UNITED STATES
Rachel Kreier*
Peter Zweifel**
I.
INTRODUCTION
A recent Google search on the words, “Switzerland health care
system,” turned up three news reports in the first screen of results
presenting Switzerland as a model for the United States. 1 The common
thread in these works was the idea that the Swiss system, which
mandates that individuals choose their health care coverage from among
the offerings of competing, private, not-for-profit insurers, 2 might be
more politically palatable in the United States than models with greater
reliance on government-provided health insurance, such as Canada’s
single-payer approach. 3 A front page New York Times article headlined,
* Health Economist and Assistant Professor of Economics, Hofstra University. B.A.,
Cornell University; M.S., University of Florida; Ph.D., State University of New York at Stony
Brook. Her research has focused on the impact of income and insurance coverage on disparities in
quality of care and on the managed competition approach to providing health insurance coverage.
** Professor of Economics at the University of Zurich at the Socioeconomic Institute.
Together with Friedrich Breyer and Matthias Kifmann, he is the author of HEALTH ECONOMICS
(Springer 2d ed. 2009). His other texts, available in German only, include: An Economic Model of
Physician Behavior; Insurance Economics; International Economics; and Energy Economics. His
work has been published by the American Economic Review, Antitrust Bulletin, European
Economic Review, Health Economics, Journal of Health Economics, Journal of Risk & Insurance,
Journal of Risk & Uncertainty, Public Choice, among others. Together with Mark Pauly of the
University of Pennsylvania, he is the founding editor of the International Journal of Health Care
Finance and Economics (Springer). From 1996 to 2005, he served as a member of the Competition
Commission, the Swiss antitrust authority.
http://www.google.com/search?hl=en&source=hp&biw=1189&bih=564&q=
1. GOOGLE,
switzerland+health+care+system&aq=0&aqi=g10&aql=&oq=switzerland+health&gs_rfai= (search
“Switzerland health care system”) (last visited Jan. 19, 2011).
2. See, e.g., Regina Herzlinger, Why Republicans Should Back Universal Health Care,
ATLANTIC (Apr. 13, 2009, 9:16 AM ET), http://www.theatlantic.com/politics/archive/2009/04/whyrepublicans-should-back-universal-health-care/13013/.
3. Theodore R. Marmor & Jonathan Oberlander, Paths to Universal Health Insurance:
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“Swiss Model for Health Care Thrives Without Public Option,”
illustrates the way in which American commentators cast Switzerland in
the role of counterweight to the Canadian example as a Congress sharply
divided along partisan lines debated health care reform last autumn. 4
Indeed, the Patient Protection and Affordable Care Act 5 (“ACA”)
signed into law by President Barack Obama on March 23, 2010, does
share some characteristics with the Swiss system (“LAMal”) established
by the 1994 Revised Health Insurance Law. Both laws include an
individual mandate to purchase health insurance meeting legally
established standards. 6 Both impose requirements on insurers designed
to ensure that individuals with health problems have access to coverage
on the same terms as those without such problems. 7 Both include public
subsidies to make coverage more affordable for lower income
individuals. 8 And both rely on competing health insurers. 9 There are
also significant differences in the legal frameworks established by
LAMal and ACA. In some important respects, the Swiss law is less
market-oriented than ACA. For example, LAMal forbids health insurers
from earning profits on their sales of social health insurance. 10 It also
provides for regulated or negotiated prices for pharmaceuticals, medical
devices, and the services of health care providers, 11 and places primary
responsibility for funding hospital care on cantonal governments. 12 On
the other hand, despite America’s oft-vaunted love affair with private
markets, the government plays a much bigger role in the provision of
health coverage in the United States than it does in Switzerland. While
all Swiss in a given region—be they rich or poor, young or old—choose
their health coverage from an identical menu of private insurance
Progressive Lessons from the Past for the Future, 2004 U. ILL. L. REV. 205, 221-22.
4. Nelson D. Schwartz, Swiss Model for Health Care Thrives Without Public Option, N.Y.
TIMES, Oct. 1, 2009, at A1.
5. In the interest of brevity, we will use the abbreviation ACA to refer to the final health
reform legislation, as laid out in the Patient Protection and Affordable Care Act, Pub. L. No. 111148 (2010), and in the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152.
6. Patient Protection and Affordable Care Act, Pub. L. No. 111-148, §§ 1501, 5000A, 124
Stat. 119, 242, 244 (2010) (mandating that an individual maintain “minimum essential coverage”
for themselves and their dependents); id. § 1302(a)–(b) (establishing legal standards); LOI
FÉDÉRALE SUR L’ASSURANCE-MALADIE [LAMAL] [FEDERAL LAW ON HEALTH INSURANCE], Jan. 1,
2010, RS 832.10, art. 3, para. 1 (Switz.); id. art. 25.
7. Patient Protection and Affordable Care Act § 2704(a); LAMAL art. 13, para. 2(a).
8. Patient Protection and Affordable Care Act § 1413; LAMAL art. 66, paras. 1–2.
9. Patient Protection and Affordable Care Act § 1311; LAMAL art. 41, para. 1.
10. See LAMAL art. 43, paras. 4–5 (explaining that insurance rates are based on a uniform
tariff structure set by the Swiss federal government); EUROPEAN OBSERVATORY ON HEALTH CARE
SYS., HEALTH CARE SYSTEMS IN TRANSITION: SWITZERLAND 17 (2000).
11. LAMAL art. 44, para. 1.
12. Id. art. 49, paras. 1–3.
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offerings, 13 almost a third of U.S. health coverage is provided through
government programs. 14 The proportion of Americans with government
coverage will increase substantially as a result of ACAs Medicaid
expansions. 15
Two other significant differences between the two systems are less
easy to place on the spectrum from less to more market-oriented. The
first of these is that LAMal expressly forbids employers from providing
basic social health insurance as a benefit of employment, while ACA
strengthens, or at least slows the erosion of, employer-sponsored health
insurance. 16 The second of these is that the market share of managed
care products is much lower in Switzerland than in the United States, 17
and the contractual provisions of the managed care products offered are
quite different in the two countries as well. 18
Both the similarities and the differences between the two countries’
systems for funding and delivering health care deserve to be more
widely understood if Americans are to learn from the Swiss experience,
rather than use it merely as a touchstone for particular points of view in
13. See EUROPEAN OBSERVATORY ON HEALTH CARE SYS., supra note 10, at 17.
14. The U.S. Census’ Current Population Survey estimates that twenty-nine percent of the
population was covered under government programs in 2008. See U.S. CENSUS BUREAU, INCOME,
POVERTY AND HEALTH INSURANCE COVERAGE IN THE UNITED STATES: 2008, at 64 tbl.C-3 (2009),
available at http://www.census.gov/prod/2009pubs/p60-236.pdf. The picture is muddied somewhat
by the fact that Medicare and Medicaid/Children’s Health Insurance Program (“CHIP”) contract
with private health plans to cover some of their enrollees. Almost a quarter of Medicare enrollees
receive their coverage through private Medicare Advantage plans. There has been a substantial
increase in Medicare private plan enrollment since passage of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, § 1860D-1, 117 Stat. 2066,
2071, which created a Medicare Part D prescription drug benefit that is only available via
enrollment in a private plan. See MARSHA GOLD ET AL., KAISER FAMILY FOUND., MEDICARE
ADVANTAGE 2010 DATA SPOTLIGHT: PLAN ENROLLMENT PATTERNS AND TRENDS 1, 3 (2010),
available at http://www.kff.org/medicare/upload/8080.pdf; KAISER COMM’N ON MEDICAID & THE
UNINSURED, KAISER FAMILY FOUND., MEDICAID: A PRIMER 24 (2010), available at
http://www.kff.org/medicaid/upload/7334-04.pdf. About seventy percent of Medicaid and CHIP
enrollees receive their services through managed care organizations that hold contracts with state
Medicaid programs, although there is wide variation in the degree to which these contracting
organizations are risk-bearing. See KAISER COMM’N ON MEDICAID & THE UNINSURED, supra, at 18.
15. Rand Institute simulations project increases in Medicaid/CHIP enrollment of twelve
million by 2019 due to the ACA. See RAND CORP., ANALYSIS OF THE PATIENT PROTECTION AND
AFFORDABLE CARE ACT (H.R. 3590), at 3 tbl.1, available at http://www.rand.org/pubs/
research_briefs/2010/RAND_RB9514.pdf.
16. RAND projects that the ACA will result in six million more individuals enrolled in
employer-provided coverage in 2019 than would have been enrolled in the absence of the
legislation. Id. at 3. While one could argue that it is more “market-oriented” to have individuals
choose their insurer and coverage package than to have an employer make those decisions for its
employees, one could also argue that it is less “market-oriented” to have the government restrict the
nature of the benefits that can be offered in the contract between employer and employee.
17. See Peter Zweifel, Switzerland, 25 J. HEALTH POL. POL’Y & L. 937, 938 tbl.1 (2000).
18. See infra Part IV.
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the on-going political debate. Our goal in this Article is to describe some
important aspects of the Swiss system since LAMal reforms took effect
in 1996 and, with a certain amount of trepidation, to explore the lessons
that policy makers and interested citizens in the United States might
draw from the Swiss experience. Since we are economists, rather than
legal scholars, we will highlight the ways in which ideas from our
discipline have influenced the Swiss legal framework.
II.
HOW THE SWISS SYSTEM WORKS
In December 1994, the revised Health Insurance Law was narrowly
approved by one of the popular referendums for which Switzerland is
famous. 19 Its provisions went into effect in 1996. 20 The 1996 reforms
stipulate that all Swiss purchase Compulsory Basic Social Insurance
(“CBSI”). 21 That is, translating into American parlance, the law imposes
an individual mandate. Employers are not permitted to offer CBSI
coverage to their employees, although they may provide supplemental
coverage. 22 The terms of the rather comprehensive CBSI benefit
19. Chancelleire Fédérale Suisse, Votation populaire du 4 décembre 1994 [Popular Vote on
Dec. 4, 1994], http://www.admin.ch/ch/f/pore/va/19941204/index.html (last visited Jan. 19, 2011).
20. Marcel Bilger, Progressivity, Horizontal Inequality and Reranking Caused By Health
System Financing: A Decomposition Analysis for Switzerland, 27 J. HEALTH ECON. 1582, 1582
(2008). The LAMAL was approved by fifty-two percent of voters. Paul J. Donahue, Federalism and
the Financing of Health Care in Canada and Switzerland: Lessons for Health Care Reform in the
United States, 21 B.C. INT’L & COMP. L. REV. 385, 423 (1998). Swiss voters overwhelmingly
rejected a proposed move to a single-payer system in a 2007 referendum. Chancellerie fédérale,
Votation no 528 Tableau récapitulatif [Vote No. 528 Summary Table], http://www.admin.ch/
ch/f/pore/va/20070311/det528.html (last visited Jan. 19, 2011). However, voters also
overwhelmingly rejected a 2008 proposal to introduce more market-oriented reforms. Chancellerie
fédérale, Votation populaire du 1er juin 2008 [Popular Vote on June 1, 2008],
http://www.admin.ch/ch/f/pore/va/20080601/index.html (last visited Jan. 19, 2011); see Luca
Crivelli, Swiss Deny More Competition in Health Insurance, HEALTH POL’Y MONITOR,
http://www.hpm.org/en/Surveys/USI_-_Switzerland/12/Swiss_deny_more_competition_in_health_
insurance.html (last visited Jan. 19, 2011).
21. See Bilger, supra note 20, at 1582.
22. RS 830.10, art. 3 makes individuals and individual families responsible for their own
CBSI insurance. LOI FÉDÉRALE SUR L’ASSURANCE-MALADIE [LAMAL] [FEDERAL LAW ON HEALTH
INSURANCE], Jan. 1, 2010, RS 832.10, art. 3 (Switz.). Article 62 forbids all third parties from
covering the differential premiums or the differential out-of-pocket cost-sharing consequent to each
individual’s choice of CBSI policy. Id. art. 62, para. 2(a). The employer penalties and incentives
designed to bolster employer coverage in the ACA are found in Patient Protection and Affordable
Care Act, Pub. L. No. 111-148, § 1421, 124 Stat. 119, 237, 244 (2010) (credit for employee health
insurance expenses of small businesses), and sections 1511–15, 124 Stat. at 254-58 (employer
responsibilities). A lively strand in the literature explores labor market distortions associated with
America’s reliance on employer-provided health coverage. For a review, see generally Jonathan
Gruber, Health Insurance and the Labor Market, in HANDBOOK OF HEALTH ECONOMICS: VOL. 1A
(Anthony J. Culyer & Joseph P. Newhouse eds., 2000).
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93
package are established by the federal government under guidelines laid
out in the statute. 23
In 2006, eighty-seven insurers were registered to participate in the
CBSI market, down from 145 in 1996. 24 Collectively, the largest fifteen
insurers had an eighty percent market share. 25 As will be the case for
policies offered in the new Health Benefit Exchanges to be created under
the terms of ACA, Swiss CBSI policies are subject to community rating
and guaranteed issue. 26 “Community rating” means that each insurer
must charge all enrollees in a specific plan in a given geographic region
the same premium, regardless of health status or health risk (with some
carefully defined exceptions for those below the age of twenty-five). 27
“Guaranteed issue” means that insurers may not deny coverage on the
basis of health status or risk. 28 Swiss supplemental coverage, however, is
subject to neither community rating nor guaranteed issue. 29 Premiums
for both types of products are set by insurers, 30 although CBSI
premiums are subject to governmental review. 31
23. See LAMAL arts. 25–31 for the catalogue of services that must be covered under CBSI.
Article 33 charges the Swiss Federal Council with determining the details of coverage on the basis
of, “efficacy, appropriateness and economy.” Id. art. 33; see EUROPEAN OBSERVATORY ON HEALTH
CARE SYS., supra note 10, at 33.
24. EUROPEAN OBSERVATORY ON HEALTH CARE SYS., supra note 10, at 18 tbl.2; OFFICE
FÉDÉRAL DE LA SANTÉ PUBLIQUE, STATISTIQUE DE L’ASSURANCE-MALADIE OBLIGATOIRE 2006
[STATISTICS OF MANDATORY HEALTH INSURANCE 2006] 120 tbl.5.01 (2006), available at
http://www.bfs.admin.ch/bfs/portal/fr/index/infothek/lexikon/bienvenue___login/blank/zugang_lexi
kon.Document.106221.pdf.
25. Authors’ calculation from data reported by the Swiss Federal Office of Public Health.
OFFICE FÉDÉRAL DE LA SANTÉ PUBLIQUE, supra note 24, at 120 tbl.5.01.
26. LAMAL art. 61, para. 1 (establishing community rating); id. art. 4, para. 2 (establishing
guaranteed issue).
27. Id. art. 61, para. 2. ACA will permit more extensive age rating for policies sold through
the exchanges than Switzerland allows. The Secretary of Health and Human Services, in
consultation with the state insurance commissioners, will define permissible age bands, and
premiums for the oldest age band may be as much as three times as large as premiums for the
youngest group. Patient Protection and Affordable Care Act § 2701(a)(1)(A)(iii), (a)(3), 124 Stat. at
155. In addition, ACA will permit insurers to offer a cheaper, less comprehensive benefit package
(“catastrophic coverage”) to individuals under the age of thirty. Id. § 1302(e), 124 Stat. at 168.
28. LAMAL art. 61, para. 1 establishes community rating, and LAMAL art. 4, para. 2
establishes guaranteed issue. ACA also will enforce community rating and guaranteed issue for
policies purchased individually and in the small group market. Risk rating will continue to be
permitted at the group level in the large group market. Patient Protection and Affordable Care Act
§ 2701(a)(1)(A)(i), 124 Stat. at 155 (amending the Public Health Service Act to enforce guaranteed
issue in all markets and community rating in the individual and small group markets).
29. See CLAIRE DALEY & JAMES GUBB, CIVITAS: INST. FOR THE STUDY OF CIVIL SOC’Y,
THE SWISS HEALTH SYSTEM 5 (2007), http://www.civitas.org.uk/nhs/download/Switzerland.pdf.
30. LAMAL art. 61, para. 1.
31. Id. art. 61, para. 5.
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About a third of the population purchases supplemental coverage. 32
The proportion has fallen since 1996, because the reforms made CBSI
coverage more comprehensive at the same time as they effectively
suppressed the pre-reform subsidization of supplemental coverage by
CBSI premiums, leading to a substantial hike in supplemental
premiums. 33 Some observers have portrayed Swiss supplemental
coverage as a matter of “hotel amenities,” 34 but in fact, the coverage
entitles beneficiaries to preferential access to senior physicians when
hospitalized, which is probably at least as important to beneficiaries as
the amenity of a private or semi-private hospital room. 35 Health insurers
are not permitted to earn profits on CBSI policies, although they may
earn profits on supplemental coverage. 36 Many insurers offer both CBSI
and supplemental products, 37 which may permit them to evade the
restrictions on profits to some extent through charging overhead
expenses to the CBSI account.
Given community rating and guaranteed issue, and in accordance
with the economic theory of “one price,” CBSI premiums for any given
coverage package would be expected to converge across companies over
time as policy holders—whether healthy or sick—gravitated to the
companies offering the lowest premiums. 38 In fact, however, there is
surprisingly wide and persistent variation in CBSI premiums for
identical coverage from different companies, as a large subset of
consumers appear reluctant to switch insurers. 39 Both consumers’ desire
to maintain CBSI and supplemental coverage with the same insurer, and
their concern that they may lose supplemental coverage or have
supplemental premiums increase if they switch companies for the CBSI
32. CIVITAS: THE INST. FOR THE STUDY OF CIVIL SOC’Y, THE SWISS HEALTH CARE SYSTEM
4 (2002), http://www.civitas.org.uk/pdf/Switzerland.
33. See EUROPEAN OBSERVATORY ON HEALTH CARE SYS., supra note 10, at 33.
34. See WORLD HEALTH ORG. EUR., WHAT ARE THE EQUITY, EFFICIENCY, COST
CONTAINMENT AND CHOICE IMPLICATIONS OF PRIVATE HEALTH-CARE FUNDING IN WESTERN
EUROPE? 9 (2004), http://www.euro.who.int/__data/assets/pdf_file/0003/74694/E83334.pdf.
35. See Hospital. L’assurance complémentaire d’hospitalisation intelligente, SANITAS,
https://www.sanitas.com/pub/ServiceBroker?PAGEID=1261 (last visited Jan. 19, 2011) (providing
an example of complementary coverage from one of the major Swiss insurers).
36. LAMAL art. 12, paras. 1–2.
37. See EUROPEAN OBSERVATORY ON HEALTH CARE SYS., supra note 10, at 17.
38. See Karl Gunnar Persson, The Law of One Price, EH.NET (Feb. 5, 2010, 14:59),
http://eh.net/encyclopedia/article/persson.LOOP (last visited Jan. 19, 2011).
39. For example, a recent search for traditional coverage for a family of four in the town of
Nyon in the canton of Vaud (just outside Geneva) with a deductible of CHF1500 found policies for
sale with monthly premiums ranging from CHF663.20 to CHF1036.80 (a Swiss franc is worth a
little less than a dollar). See also OFFICE FÉDÉRAL DE LA SANTÉ PUBLIQUE, supra note 24, at 23, 24
tbl.G3d (stating that most people remain with the insurers that offer high premiums and displaying
in box plots the degree of premium variation for the policies actually purchased by canton).
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HEALTH INSURANCE IN SWITZERLAND
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coverage, may contribute to the persistence of premium variation,
although “status quo bias” may play a role as well. 40
LAMal provides for a risk adjustment scheme in the CBSI market,
which is administered by santésuisse, the Swiss health insurer trade
association. 41 In general, the goal of risk adjustment is to avoid
rewarding insurers for attracting healthy enrollees or for discouraging
sick ones so that insurers compete on cost and quality, not on risk
selection. 42 Thus, risk adjustment schemes are designed to transfer funds
from insurers whose enrollees have a lower-than-average risk profile (a
favorable selection) to insurers whose enrollees have a higher-thanaverage risk profile (an adverse selection). 43 At present, the Swiss
scheme takes into account only age and gender, but prior-year
hospitalization is to be added in 2012. 44
40. A number of parliamentary initiatives have been put forward to make it easier for
individuals to receive their CBSI and supplemental coverage from two different insurers. See, e.g.,
Normes de gouvernance et critères de transparence dans l’assurance-maladie [Governance
Standards and Transparency Requirements in Health Insurance]: Hearing on 08.434 Before the
Comm’n on Soc. Sec. & Pub. Health (2008) (presented by Jacqueline Fehr),
http://www.parlament.ch/e/suche/pages/geschaefte.aspx?gesch_id=20080434;
Faciliter
le
changement de caisse d’assurance-maladie selon la LAMAL. Simplification de la facturation pour
les patients et les assurés [To Facilitate Switching Health Insurance Plans Under the LAMal:
Simplification of Billing for Patients and Enrollees]: Hearing 08.484 Before the Comm’n on Soc.
Sec. & Pub. Health (2008) (presented by Steiert Jean-François), http://www.parlament.ch/f/
Suche/Pages/geschaefte.aspx?gesch_id=20080484; Faciliter le changement de caisse d’assurancemaladie selon la LAMal. Levée du chargement pour frais sur les assurances complémentaires [To
Facilitate Switching Health Insurance Plans Under the LAMal: Lifting the Administrative Charge
for Supplemental Insurance Expenses]: Hearing 08.485 Before the Comm’n on Soc. Sec. & Pub.
Health (2008) (presented by Steiert Jean-François), http://www.parlament.ch/f/suche/pages/
geschaefte.aspx?gesch_id=20080485; cf. SANTÉSUISSE, INTERVENTIONS POLITIQUES EN MATIÈRE
D’ASSURANCE-MALADIE
[HEALTH INSURANCE POLICY INTERVENTIONS] 7-8 (2010),
http://www.santesuisse.ch/datasheets/files/201101171453450.pdf (stating santésuisse’s position,
which opposes Steiert’s parliamentary initiatives).
41. LAMAL art. 105, para. 3; see OFFICE FEDERAL DES ASSURANCES SOCIALES, ANALYSE DES
EFFECTS DE L’ASSURANCE-MALADIE: RAPPORT DE SYNTHESE [STUDY OF THE EFFECTS OF HEALTH
INSURANCE: SUMMARY REPORT] 90 (2001).
42. OFFICE FÉDÉRAL DES ASSURANCES SOCIALES, supra note 41, at 23; Konstantin Beck et al.,
Risk Adjustment in Health Insurance and Its Long-Term Effectiveness, 29 J. HEALTH ECON. 489,
489 (2010).
43. See OFFICE FEDERAL DES ASSURANCES SOCIALES, supra note 41, at 24.
44. EUROPEAN OBSERVATORY ON HEALTH CARE SYS., supra note 10, at 29; DAVID SQUIRES,
THE COMMONWEALTH FUND, THE SWISS HEALTH CARE SYSTEM, 2009, at 1,
http://www.thinkswiss.org/attachments/-01_swiss_health_care_system.pdf; Beck et al., supra note
42, at 491.
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In keeping with a philosophy of demand-side cost control,45 LAMal
also sets out cost-sharing provisions in considerable detail. The law
specifies a minimum annual deductible of approximately $400 (at the
2010 exchange rates), with a choice of deductible up to $2500 in return
for lower premiums. 46 Patients are liable for ten percent co-insurance for
expenditure in excess of the deductible, with a cap of $700. 47 Maximum
annual CBSI cost-sharing is therefore limited to $3200. 48 Giving a nod
to the supply-side approach to cost control, the law also allows for a
variety of managed care models. 49 Insurers are permitted to offer limited
discounts on premiums for their managed care plans, ranging from
fifteen to twenty-five percent, depending on the type of plan. 50 Costsharing is also reduced for managed care enrollees. 51 Except for these
managed care models, LAMal requires CBSI insurers to cover care from
any qualified health care provider at the established rates. 52
Santésuisse has advocated abolishing this “obligation to contract,”
arguing that it makes doctors reluctant to enter into capitated or salaried
contracts with insurers. 53 The Federal Office of Social Insurance
45. The basic principle behind demand-side approaches to cost control is that consumers’
costs should increase as they use more (or more expensive) health care, thus giving each individual
an incentive to use less (or less expensive) care, which in turn should reduce society’s health care
costs. The different forms of patient cost-sharing—co-payments, co-insurance, and deductibles—are
the standard items in the demand-side cost-control toolkit. See Randall P. Ellis & Thomas G.
McGuire, Supply-Side and Demand-Side Cost Sharing in Health Care, J. ECON. PERSP., Fall 1993,
at 135, 136. In general, higher premiums are not cost-control tools, since premiums do not vary with
utilization. However, one model of insurance contract available in Switzerland rewards patients
with no claims during one year with a lower premium in subsequent years. Since the premium
varies with utilization, this is another example of a demand-side approach to cost control.
46. See LAMAL art. 64, para. 2(a); OFFICE FÉDÉRAL DE LA SANTÉ PUBLIQUE, supra note 24, at
183 tbl.11.08; SQUIRES, supra note 44, at 1.
47. SQUIRES, supra note 44, at 1.
48. This is the total of the maximum deductible and the maximum co-insurance payable in
excess of the deductible.
49. LAMAL art. 62; id. art. 64, para. 6(c).
50. Konstantin Beck et al., CSS Inst. for Empirical Health Econ., Efficiency Gains Thanks to
Managed Care?: Evidence from Switzerland 7 (Jan. 30, 2010) (unpublished manuscript),
http://www.css.ch/en/zwillingsanalyse_socialpolitik_englisch_gekuerzte_version2.pdf.
51. Modèle d’assurance: HMO, BONUS.CH, http://www.bonus.ch/Assurance-maladie/
Modeles-assurance/HMO-modele-assurance.aspx (last visited Jan. 19, 2011) (noting that HMO
enrollees are free from all cost-sharing). Thus far, no insurer has emerged offering only managed
care plans. If such an insurer were to emerge, regional average premiums for conventional coverage
would probably be used as the benchmark against which permissible discounts would be measured.
52. See LAMAL art. 41, paras. 1, 4. The Swiss refer to this provision of the law as “obligation
to contract.” In the United States, the analogous statues are known as “any willing provider” laws,
since they require insurers to cover the costs of care procured from any provider who is willing to
accept the insurer’s payment schedule. See Ky. Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329,
331-32 (2003).
53. GIANFRANCO DOMENIGHETTI & LUCA CRIVELLI, SECURITE DE L’APPROVISIONNEMENT
EN MEDECINE DE VILLE DANS LE CADRE DE LAS SUPPRESSION DE L’OBLIGATION DE CONTRACTER
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HEALTH INSURANCE IN SWITZERLAND
97
(“FOSI”), however, has expressed concern that eliminating the
obligation to contract might lead to two-tiered care or might undermine
consistent quality of care. 54 The danger of substandard care is
counteracted by dissatisfied consumers’ legal right to switch coverage
on an annual basis. 55
The limited menu of CBSI contract types facilitates price
transparency and comparison shopping. 56 Individuals can easily generate
lists of the premiums charged for each type of contract by the insurers in
their area through commercial websites, such as Comparis and Bonus. 57
In presenting LAMal reforms to the Swiss public, advocates
stressed that their purpose was to maintain solidarity within the Swiss
community. 58 Community rating and guaranteed issue are designed to
buttress solidarity between the healthy and the sick and the young and
the old. 59 The system of subsidies for individuals and families of
“modest means” is designed to buttress solidarity across class and
income lines. 60 The subsidies, termed “individual premium reductions”
(“IPR”), are administered by the cantons, under federal guidelines that
specify that premiums net of the subsidies should cost recipients no
more than about eight percent of income. 61 The federal government
funds roughly two-thirds of the subsidies, with the cantons responsible
for the remainder. 62 As a general rule, the subsidy is tied to the average
premium in the canton. 63 This means that even individuals receiving
public subsidies bear the extra cost if they select unusually expensive
coverage, thus ensuring that all consumers have an incentive to make
cost-effective choices. 64 In 2001, about a third of the population
[SECURITY OF SUPPLY CITY OF MEDICINE UNDER THE ABOLITION OF THE OBLIGATION TO
CONTRACT] 2 (2001), http://www.ti.ch/DSS/DSP/SezS/pdf/GD-LC-securite_approvision_medicine
_de_ville.pdf.
54. OFFICE FEDERAL DES ASSURANCES SOCIALES, supra note 41, at XII.
55. In response to evidence that managed care enrollees tend to switch to conventional
coverage after they develop health problems, there was a proposal to extend the enrollment
commitment for managed care to three years, which was, however, rejected by Parliament
(information obtained from private communication from Mr. Altermatt of santésuisse).
56. OFFICE FÉDÉRAL DE LA SANTÉ PUBLIQUE, supra note 24, at 120 tbl.5.01.
57. Comparez les assurances maladie et payez moins, COMPARIS.CH, http://fr.comparis.ch/
krankenkassen/default.aspx (last visited Jan. 19, 2011); Der beste Preis per Mausklick!, BONUS.CH,
http://www.bonus.ch (last visited Jan. 19, 2011). The ACA contains similar policy standardization
provisions with its specification of Bronze, Silver, Gold, and Platinum benefit packages. Patient
Protection and Affordable Care Act, Pub. L. No. 111-148, § 1302, 124 Stat. 119, 167 (2010).
58. OFFICE FEDERAL DES ASSURANCES SOCIALES, supra note 41, at 1.
59. Id. at 75.
60. Id.
61. Id. at 35.
62. Id. at 92-93.
63. See id. at 94.
64. Id. at 101. Thus, the Swiss subsidies more-or-less conform to the principles of the
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received some level of subsidy, and IPR payments accounted for about
fifteen percent of total CBSI premiums. 65
The law, and the subsequent amendments, also provide for
negotiated and/or regulated prices for medical devices, pharmaceuticals,
and the services of health care providers. 66 Hospitals are funded partly
by payments from insurers, but mainly by the cantons, despite lobbying
by santésuisse to channel all hospital funding through its members. 67
Prior to 2004, doctor fees were negotiated at the cantonal level
between santésuisse and the doctors’ professional associations. 68 A new
federal scheme, called TARMED, went into effect on January 1, 2004. 69
The scheme is implemented via an organization called TARMED
Suisse, 70 with membership composed of the Swiss hospital organization,
“managed competition” approach to health insurance, which requires that individuals bear the
expense at the margin of choosing more expensive coverage. See, e.g., Alain C. Enthoven, The
History and Principles of Managed Competition, 12 HEALTH AFF. 24, 29 (1993), available at
http://content.healthaffairs.org/content/12/suppl_1/24.full.pdf+html. For a critical analysis of the
ability of the managed competition approach to deliver effective cost control in the American
context, see Rachel Kreier, Economic Theory and Political Reality: Managed Competition and U.S.
Health Policy, 34 POL. & POL’Y 579 (2006).
65. ROBERT E. LEU & MARTIN SCHELLHORN, INST. FOR THE STUDY OF LABOR, THE
EVOLUTION OF INCOME-RELATED INEQUALITIES IN HEALTH CARE UTILIZATION IN SWITZERLAND
OVER TIME 4-5 (2004), http://www.econstor.eu/bitstream/10419/20582/1/dp1316.pdf.
66. LOI FÉDÉRALE SUR L’ASSURANCE-MALADIE [LAMAL] [FEDERAL LAW ON HEALTH
INSURANCE], Jan. 1, 2010, RS 832.10, art. 44, para. 1 (Switz.); id. art. 49, paras. 1–3.
67. See SANTÉSUISSE, PAPIER DE POSITIONNMENT: FINANCEMENT DES HÔPITAUX [POSITION
PAPER: HOSPITAL FUNDING] 1-3 (2008), http://www.santesuisse.ch/datasheets/files/200804221315
420.pdf. The Swiss describe this as a “unitary system” of hospital funding, because hospitals would
receive all payments from insurers, rather than from both insurers and cantonal governments, as is
currently the case. Id. at 1.
68. INST. FOR POLICY INNOVATION, THE DANGERS OF UNDERMINING PATIENT CHOICE:
LESSONS FROM EUROPE AND CANADA 17 (2006); Peter Zweifel & Ming Tai-Seale, An Economic
Analysis of Payment for Health Care Services: The United States and Switzerland Compared, 6 J.
HEALTH CARE FIN. & ECON. 197, 198-99 (2009).
69. TARMED—un tarif à l’acte détaillé [TARMED—A Tariff Act Detailed], FMH
FÉDÉRATION DES MÉDECINS SUISSES [FMH SWISS MED. ASSOC.], http://www.fmh.ch/fr/tarifs/
tarmed-tarif.html (last visited Jan. 19, 2011). The name TARMED is related to the phrase “tarif
médical,” which translates as “medical pricing schedule.” The TARMED scheme bears many
similarities to the Resource Based Relative Value Scale that U.S. Medicare has used to set physician
payments since 1992. See, e.g., The Resource Based Relative Value Scale: Overview of the RBRVS,
AM. MED. ASS’N, http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-yourpractice/coding-billing-insurance/medicare/the-resource-based-relative-value-scale/overview-ofrbrvs.shtml (last visited Jan. 19, 2011). TARMED establishes the relative values of different
services—for example, TARMED specifies the ratio of the payment for an office visit to a
cardiologist relative to the payment for a well-baby visit with a pediatrician. These relative values
are uniform across Switzerland, but the actual monetary payments vary across cantons, reflecting
differences in cost-of-living and medical costs across the cantons. See infra note 74 and
accompanying text.
70. TARMED Suisse, TARMED SUISSE, http://www.tarmedsuisse.ch/gesellschaft.html (last
visited Jan. 19, 2011).
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HEALTH INSURANCE IN SWITZERLAND
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the federation of Swiss doctors, santésuisse, and the trade associations
representing Swiss accident, military, and disability insurers. 71
TARMED Suisse has responsibility to draw up a schedule of “tariff
points” that applies to each of some 4600 ambulatory services, 72 which
then must be approved by the Federal Council that serves as
Switzerland’s executive body. 73 The schedule establishes the relative
value of each of the services on a nationwide basis, but the monetary
value of each point differs from canton to canton. 74
In 2007, the Swiss parliament passed legislation providing for a
move to a diagnosis-related group (“DRG”) system of prospective
hospital payments, which is scheduled to go into effect on January 1,
2012. 75 The DRG approach to hospital payments was pioneered by U.S.
Medicare during the Reagan administration, 76 although the Swiss
version will take the German implementation of the approach as its
jumping-off point. 77 A DRG payment regime is based on a schedule of
diagnosis-related payments. 78 For each admission, the hospital receives
the specified payment regardless of how many procedures are performed
or how many days the patient is hospitalized, 79 thus creating incentives
for the hospital to rein in resource use. The Swiss legislation provided
for the creation of a public benefit corporation called SwissDRG,
charged with responsibility for developing the schedule of DRG
payments. 80 In addition to the professional and trade associations
71. Id.
72. Zweifel & Tai-Seale, supra note 68, at 198; TARMED—un tarif à l’acte détaillé, supra
note 69.
73. LOI FÉDÉRALE SUR L’ASSURANCE-MALADIE [LAMAL] [FEDERAL LAW ON HEALTH
INSURANCE], Jan. 1, 2010, RS 832.10, art. 46, para. 4 (Switz.).
74. The requirement to maintain cost neutrality within each canton for the first eighteen
months that the system was in place dictated the initial conversion rates from points to money. See
TARMED—un tarif à l’acte détaillé, supra note 69. For a critical review of TARMED’s incentive
effects and a comparison with the U.S. relative value based system, see Zweifel & Tai-Seale, supra
note 68, at 203-05, 208.
75. SwissDRG aktuell [SwissDRG Currently], SWISSDRG, http://www.swissdrg.org/de/index.
asp?navid=0 (last visited Jan. 19, 2011).
76. See Rick Mayes, The Origins, Development, and Passage of Medicare’s Revolutionary
Prospective Payment System, 62 J. HIST. MED. & ALLIED SCI. 21, 41-43, 46-48, 54 (2007).
77. WORLD HEALTH ORG., TECHNICAL BRIEFS FOR POLICY-MAKERS NO. 2: PROVIDER
PAYMENTS AND COST-CONTAINMENT LESSONS FROM OECD COUNTRIES 3 (2007), available at
http://www.who.int/health_financing/documents/pb_e_07_2-provider_payments.pdf.
78. William C. Hsiao et al., Lessons of the New Jersey DRG Payment System, 5 HEALTH AFF.
32, 33 (1986), available at http://content.healthaffairs.org/content/5/2/32.full.pdf.
79. Id.
80. LOI FÉDÉRALE SUR L’ASSURANCE-MALADIE [LAMAL] [FEDERAL LAW ON HEALTH
INSURANCE], Jan. 1, 2010, RS 832.10, art. 49, paras. 1–2, 5–6 (Switz.); SwissDRG aktuell, supra
note 75.
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participating in TARMED Suisse, SwissDRG includes representation
from the Swiss Conference of Cantonal Health Ministers. 81
III.
SWISS SYSTEM PERFORMANCE
In 2001, the Swiss FOSI issued a report evaluating the
achievements of the first five years of reforms under LAMal based on a
series of expert studies. 82 In a cover letter to the report, the FOSI
director noted that the law had been crafted with three goals in mind: “to
reinforce solidarity” among recipients “young and old, healthy and ill,
rich and poor;” to assure high quality care; and to “put a damper on
rising costs.” 83 The director noted that the experts generally gave the
reformed Swiss system high marks with respect to the first two goals,
but found that the reforms “have hardly influenced the augmentation of
costs.” 84 Although most political observers continue to view its high
costs as the Achilles’ heel of the Swiss system, they may well be the
expression of citizens’ preferences. 85
Switzerland ties with oil-rich Norway for having the second most
expensive health care system in the world, 86 but still spends about forty
percent less per capita than the United States. 87 In 2007, Swiss per capita
health care spending was $4417, 88 versus an Organization for Economic
Cooperation and Development (“OECD”) average of $2984, 89 and U.S.
spending of $7290. 90 Switzerland devoted 10.8% of its GDP to health
81. Die SwissDRG AG [The SwissDRG AG], SWISSDRG, http://www.swissdrg.org/de/
06_swissdrg_ag/SwissDRG_AG.asp?navid=1 (last visited Jan. 19, 2011); see supra notes 69-71.
82. O. Piller, Foreword to OFFICE FEDERAL DES ASSURANCES SOCIALES, supra note 41.
83. OFFICE FEDERAL DES ASSURANCES SOCIALES, supra note 41, at XXXIII.
84. See id. at XXXIII-XXXIV.
85. This statement is based on two types of evidence. First, typically, whenever there is a
cantonal vote on a hospital project, the project passes by a wide majority. For instance, there was a
57.7% majority in favor of modernization of the university hospital of the canton of Zurich (May
21, 2006), following a 70.9% majority for creating a new central psychiatric clinic the previous year
(Feb. 27, 2005). See Kantonale Volksubstimmung vom 21. Mai 2006, http://www.statistik.zh.ch/
abstimmungen/2006_05_21/pdf/zuezh.pdf; Kantonale Volksubstimmung vom 27. Februar 2005,
http://www.statistik.zh.ch/abstimmungen/2005_02_27/pdf/zuezh.pdf. Second, choice experiments
indicate that the Swiss would have to be compensated by a premium reduction of some twenty-five
percent for accepting a delay of a mere two years in access to medical innovation (which constitutes
the main driver of health care expenditure). See Peter Zweifel et al., Consumer Resistance Against
Regulation: The Case of Health Care, 29 J. REG. ECON. 319, 324, 326, 330 (2006).
86. ORG. FOR ECON. CO-OPERATION & DEV., HEALTH AT A GLANCE 2009: OECD
INDICATORS 160, 161 tbl.7.1.1 (2009), http://www.oecd.org/dataoecd/55/2/44117530.pdf.
87. See id. at 161 tbl.7.1.1.
88. Id.
89. Id.
90. Id.
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care, 91 placing it third among thirty OECD nations, behind the United
States (16%) and France (11%). 92 Nevertheless, that figure represented a
decline from 11.2% in 2005. 93 Swiss spending grew at an average
annual rate of 2.3% during the period from 1997 to 2007 (versus an
OECD average of 4.1%, and 3.4% in the United States), 94 giving
Switzerland the second lowest rate of growth (after Germany) over the
decade. 95
In general, Switzerland scores well on measures of quality of care
and health outcomes. At almost eighty-two years, Swiss life expectancy
in 2007 was second only to Japan’s (the American figure was four years
below Switzerland’s and a full year below the OECD average). 96
Switzerland’s infant mortality rate is less impressive, equal in 2007 to
the OECD average of 3.9 deaths per 1000 live births, 97 although still
much better than the scandalously high American figure of 6.7 deaths
per 1000 live births. 98 Of course, life expectancy and infant mortality
reflect many aspects of society apart from the performance of the health
care system, including lifestyle, education, living conditions, and the
proportion of the population comprised of immigrants, 99 racial and
ethnic minorities, and the poor. However, Switzerland also generally
scores well on measures more closely tied to the health care system per
se, such as avoidable hospitalizations for asthma. 100 Waiting lists for
surgeries and diagnostic procedures are almost unheard of in
Switzerland. 101
91. Id. at 163 tbl.7.2.1.
92. Id.
93. Id. at 198 tbl.A.12.
94. Id. at 161 tbl.7.1.2.
95. Id. As OECD statisticians note, high-spending countries generally exhibited slower rates
of growth in per capita health spending, while lower spenders, such as Korea, Spain, Portugal, and
the Eastern European members of the OECD, tended to exhibit faster rates of increase. Id. at 161
tbls.7.1.1 & 7.2.1. Taking into account the high level of American spending, the United States had
an unexpectedly high rate of growth, even though its rate was below the OECD average. Id. Also
note that an increase in the share of GDP devoted to health care results from health care costs that
increase more quickly than does GDP. Id. at 162. In Switzerland’s case, multiple years of slow GDP
growth during the first years of the twenty-first century contributed to an increase in the share of
GDP devoted to health care. Id. at 163 tbl.7.2.3, 196 tbl.A.10.
96. Id. at 17 tbl.1.1.1.
97. Id. at 31 tbl.1.8.1.
98. Id.
99. Id. at 30. While it is often the case that new immigrants have worse health outcomes than
the general population, the maternal and child health outcomes of Hispanic immigrants to the
United States are an exception, with better outcomes than would be expected after controlling for
income and education. See RUBÉN G. RUMBAUT, ASSIMILATION AND ITS DISCONTENTS: IRONIES
AND PARADOXES 4-5 (1999), http://www.hks.harvard.edu/inequality/Seminar/Papers/Rumbaut3.pdf.
100. See ORG. FOR ECON. CO-OPERATION & DEV., supra note 86, at 117 tbl.5.1.1.
101. See HEALTH POL’Y CONSENSUS GRP., OPTIONS FOR HEALTHCARE FUNDING 13,
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Switzerland also performs comparatively well on measures of
equity in health outcomes and health care utilization, 102 although
Switzerland does not escape the universal pattern that richer, better
educated people live longer, healthier lives. 103 Interestingly, the equity
of Swiss outcomes and utilization does not appear to have changed much
since the 1996 reforms went into effect, although perhaps the reforms
prevented deterioration in equity. 104
Switzerland may do worse on measures of the equity of health care
financing. A recent analysis by Marcel Bilger concludes that, “by
international standard[s,] health system financing is highly regressive in
Switzerland.” 105 Bilger argues that Swiss financing is even more
regressive than that of the United States, which had been judged the
most regressive in earlier work by Eddy van Doorslaer, et al. 106
However, his data excludes cantonal taxation as a source of finance, 107
which is progressive and covers half of hospital operating expenses 108 as
well as all hospital capital costs. 109 It is not clear whether the
combination of the cantonal financing with IPR subsidies suffice to
balance the inherently regressive nature of per capita premiums and the
possibly regressive high share of costs covered by out-of-pocket
expenditures.
IV.
MANAGED CARE AND CONSUMER PREFERENCES IN SWITZERLAND
Managed care remains a small part of the Swiss market, with less
than ten percent of enrollees, 110 even if we include the “Family Doctor”
variant, 111 which probably would not be counted as managed care in the
United States. The CBSI component of health insurance is a matter of
http://www.civitas.org.uk/pdf/hpcgSystems.pdf.
102. See ORG. FOR ECON. CO-OPERATION & DEV., supra note 86, at 151 tbl.6.5.1.
103. LEU & SCHELLHORN, supra note 65, at 9-10.
104. ALBERTO HOLLY & MOHAMED BENKASSMI, UNITED NATIONS RESEARCH INST. FOR SOC.
DEV., HEALTH AND HEALTH CARE INEQUALITIES IN SWITZERLAND: A BRIEF REVIEW OF THE
LITERATURE 1-2 (2003), http://www.unrisd.org/80256B3C005BCCF9/(httpAuxPages)/CB79D3646
056853EC1256E200037E3E0/$file/holly.pdf; LEU & SCHELLHORN, supra note 65, at 12-15, 18.
105. Bilger, supra note 20, at 1592.
106. Id. at 1592 & n.12 (arguing that Eddy van Doorslaer et al., The Redistributive Effect of
Health Care Finance in Twelve OECD Countries, 18 J. HEALTH & ECON. 291, 302 tbl.1 (1999),
underestimated Swiss out-of-pocket costs).
107. See Bilger, supra note 20, at 1585-88 (providing a method to compute the redistributive
effect of a tax, which does not take into account cantonal taxation).
108. EUROPEAN OBSERVATORY ON HEALTH CARE SYS., supra note 10, at 68.
109. Id.
110. See id. at 43.
111. See infra notes 135-36 and accompanying text.
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individual consumer choice in Switzerland. 112 With no employer
involvement, managed care’s low market share can be interpreted as an
expression of consumer preference. Whether American preferences
would reveal similar patterns if the role of employers were curtailed is
an open question.
The one common defining characteristic of managed care is
“selective contracting,” meaning that the health insurance plan has
contracts with a subset of health care providers, 113 and either does not
cover care provided by doctors or hospitals outside its contracted
network, or limits its coverage of such care. 114 In general, as discussed
earlier, LAMal outlaws selective contracting, but it makes an exception
for several types of managed care plans that insurers may offer alongside
their other coverage packages. 115 The managed care plans are also
exempted from using the TARMED fee schedule, if they can find health
care providers willing to enter into contracts with them under alternate
payment arrangements. 116
As in the United States, managed care in Switzerland comprises
health maintenance organizations (“HMO”) and preferred provider
organizations (“PPO”). 117 However, the Swiss imported the concept of
the HMO in the 1980s, and their usage of the term reflects the situation
in the United States at the time. 118 In the United States today, the term
HMO applies to any health plan that restricts coverage to care provided
by the network of providers with whom it has contracts, whether those
providers are integrated into a single organization or not. 119 In the Swiss
context, the term HMO applies only to a group of physicians who
practice in a unified organization (very much like a staff model HMO in
112. See id. at 43-44.
113. See Jill A. Marsteller et al., The Resurgence of Selective Contracting Restrictions, 22 J.
HEALTH POL. POL’Y & L. 1133, 1134-35, 1139-40 (1997).
114. LOI FÉDÉRALE SUR L’ASSURANCE-MALADIE [LAMAL] [FEDERAL LAW ON HEALTH
INSURANCE], Jan. 1, 2010, RS 832.10, art. 41a, paras. 1–2 (Switz.).
115. ROBERT E. LEU ET AL., THE COMMONWEALTH FUND, THE SWISS AND DUTCH HEALTH
INSURANCE SYSTEMS: UNIVERSAL COVERAGE AND REGULATED COMPETITIVE INSURANCE
MARKETS 2 (2009).
116. See HMO, COMPARIS.CH, http://en.comparis.ch/krankenkassen/info/glossar/hmo.aspx
(last visited Jan. 19, 2011).
117. Zweifel, supra note 17, at 940.
118. ROWENA JACOBS & MARIA GODDARD, CTR. FOR HEALTH ECON., SOCIAL HEALTH
INSURANCE SYSTEMS IN EUROPEAN COUNTRIES 57 (2000), http://www.york.ac.uk/che/pdf/
op39.pdf; Peter Zweifel, Managed Care in Germany and Switzerland: Two Approaches to a
Common Problem, 14 PHARMACOECONOMICS 1, 6 (1998).
119. Joseph L. Marcarelli, When Friends or Patients Ask About . . . : Health Maintenance
Organizations, 235 J. AM. MED. ASS’N 536, 536-37 (1976), available at http://jama.ama-assn.org/
content/235/5/536.full.pdf.
104
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the United States). 120 HMO personnel always include primary care
physicians, and may also include specialist physicians as well as nonphysician health care workers. 121 However, Swiss HMO (and PPO)
networks do not include hospitals, because by law, CBSI coverage is
limited to public hospitals or listed private hospitals, both of which are
heavily regulated by the cantons. 122 This means that managed care plans
cannot negotiate hospital rate discounts, causing cost savings achieved
by Swiss managed care plans to be more limited than those possible for
their U.S. counterparts. 123 In some cases, HMOs are owned by the health
insurer; 124 in other cases, they are owned by the doctors themselves. 125
Doctors may be paid a salary or a fixed monthly fee per patient
(capitation). 126 Individuals who sign up for HMO coverage are freed
from the cost-sharing responsibilities (co-insurance and deductibles)
otherwise specified under the terms of LAMal, 127 but are restricted to
using HMO physicians or outside specialists to whom they are referred
by their gatekeeper HMO doctor. 128 Premiums are discounted by about
twenty-five percent. 129
Turning to the PPO variant of managed care, a PPO in the United
States is a health plan that has different levels of patient cost-sharing
depending on whether or not the care is provided by doctors and
hospitals with whom the health plan has contracted for discounted
fees. 130 The Swiss PPO maintains a physician list and only covers the
cost of care from providers on its list. 131 Unlike the HMO, the health
care providers on the PPO list are not part of a unified organization, 132
and the individual enrollee is not required to sign up with a single
120. See JACOBS & GODDARD, supra note 118, at 57; Marcarelli, supra note 119, at 536-37;
Zweifel, supra note 118, at 6.
121. JACOBS & GODDARD, supra note 118, at 58.
122. CIVITAS: THE INST. FOR THE STUDY OF CIVIL SOC’Y, supra note 32, at 5.
123. Id. at 3.
124. Béatrice Despland, HMO, SOCIALINFO: DICTIONARY SUISSE DE POLITIQUE SOCIALE,
http://www.socialinfo.ch/cgi-bin/dicoposso/show.cfm?id=398 (last visited Jan. 19, 2011).
125. Id.
126. Id.
127. Modèle d’assurance: HMO, supra note 51; see LOI FÉDÉRALE SUR L’ASSURANCEMALADIE [LAMAL] [FEDERAL LAW ON HEALTH INSURANCE], Jan. 1, 2010, RS 832.10, art. 62,
paras. 1–2(a) (Switz.).
128. Modele d’assurance: HMO, supra note 51.
129. Id.
130. See Gregory C. Pope et al., Medicare Preferred Provider Organization Demonstration:
Plan Offerings and Beneficiary Enrollment, 27 HEALTH CARE FIN. REV. 95, 95 (2006).
131. Konstantin Beck, Waiting for Stronger Integrated Networks of Care, HEALTH POL’Y
MONITOR, Apr. 2008, http://www.css-institute.ch/en/waiting_for_stronger_integrated_networks_of_
care.pdf.
132. Konstantin Beck, Growing Importance of Capitation in Switzerland, 3 HEALTH CARE
MGMT. SCI. 111, 113 (2000).
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105
gatekeeper physician and does not need referrals to seek care from
health care providers so long as they are on the PPO list. 133 Premiums
for Swiss PPO coverage are discounted by about twenty percent. 134
The Swiss also have a “Family Doctor” managed care model in
which the individual signs up with a gatekeeper doctor chosen from a list
maintained by the insurer. In this case, the gatekeeper is in independent
practice and is paid on a fee-for-service basis by the health insurer. 135
Premiums for this model are discounted by five to fifteen percent. 136
Finally, the Swiss have developed a “TelMed” model, which
requires the individual to phone a medical counsel center before visiting
the doctor, except for certain types of specified preventive care, such as
an annual gynecological exam. 137 Premiums for TelMed model coverage
are discounted up to fifteen percent. 138 All of these discounts are close to
their regulated maximum values. 139
In the United States, the vast majority of individuals with
employer-sponsored coverage are enrolled in managed care plans, 140
with U.S.-style PPOs the dominant form of coverage. 141 In Switzerland,
however, the various models of managed care have achieved less than
ten percent market share, 142 with the Family Doctor and Swiss-style
PPO accounting for the lion’s share of Swiss managed care
enrollment. 143 Consumers have preferred to retain unrestricted provider
choice while opting for higher deductibles to benefit from premium
reductions. 144
133. Modèle d’assurance: PPO—Light [Insurance Model: PPO—Light], BONUS.CH,
http://www.bonus.ch/Assurance-maladie/Modeles-assurance/PPO-Light-modele-assurance.aspx
(last visited Jan. 19, 2011).
134. Id.
135. Modèle d’assurance: médecin de famille [Insurance Model: Family Doctor], BONUS.CH,
http://www.bonus.ch/Assurance-maladie/Modeles-assurance/Medecin-famille-modele-assurance.
aspx (last visited Jan. 19, 2011).
136. Id.
137. Modèle d’assurance: telmed (télémédicine) [Insurance Model: TelMed (Telemedicine)],
BONUS.CH, http://www.bonus.ch/Assurance-maladie/Modeles-assurance/Telmed-modele-assurance.
aspx (last visited Jan. 19, 2011).
138. Id.
139. Krankenversicherung: Alle Versicherungsmodelle [Health Insurance: Insurance Models],
BONUS.CH, http://www.bonus.ch/Krankenversicherung/Informationen/Verschiedene-Versicherungs
modelle-HMO-Hausarzt.aspx (last visited Jan. 19, 2011).
140. Managed Care and the States, NAT’L CONFERENCE OF STATE LEGISLATURES (last
updated Jan. 2011), http://www.ncsl.org/default.aspx?tabid=14470.
141. KAISER FAMILY FOUND. & HEALTH RES. & EDU. TRUST, EMPLOYER HEALTH BENEFITS:
2010 ANNUAL SURVEY 65 (2010), available at http://ehbs.kff.org/pdf/2010/8085.pdf.
142. Beck, supra note 131.
143. LEU ET AL., supra note 115, at 17; Beck, supra note 131.
144. Although recall that this applies only in the ambulatory sector. Free choice of hospital
physician requires supplemental coverage, in addition to CBSI coverage. Beck, supra note 131; see
106
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The choice experiments referenced above 145 may help explain
managed care’s low market share in Switzerland in general and in its
French-speaking part in particular. 146 These experiments were designed
to elicit consumers’ preferences in the guise of willingness-to-pay
(“WTP”) values. 147 The status quo was a conventional plan with no
restrictions on out-patient provider choice; the alternative, a plan with
managed care features but a lower premium. 148 Key findings included:



WTP to avoid restrictions on physician choice amounts to
38% of the average premium for conventional coverage,
which clearly exceeds the 25% reduction offered for an HMO
plan and the 20% offered for a PPO plan. 149 However, the
WTP value of the 38% figure represents an average across all
consumers. 150 For low-income consumers, the figure drops to
24%, while it exceeds 50% among high-income
consumers. 151
For a country of no more than 7.6 million inhabitants, there is
an amazing regional heterogeneity in WTP values. 152 In the
French-speaking western part of the country, WTP to avoid
restrictions on provider choice is almost twice as high as
among German-speaking consumers. 153 Similar differences
were found with regard to other managed care features such
as hospital choice restrictions to more centralized regional
units. 154
As one would expect, WTP values increase with age and are
CIVITAS: THE INST. FOR THE STUDY OF CIVIL SOC’Y, supra note 32, at 4.
145. See supra note 85.
146. Karolin Becker & Peter Zweifel, Age and Choice in Health Insurance: Evidence from a
Discrete Choice Experiment, 1 PATIENT 27, 32 (2008).
147. Id. at 28.
148. Id. at 31.
149. Acceptance of a physician list based on cost criteria would require 103 Swiss francs,
while the nationwide average premium was 270 Swiss francs. See Zweifel et al., supra note 85, at
325.
150. See id.
151. To fully measure willingness to pay for conventional versus managed care, one should
also account for managed care’s reduction in cost-sharing. From another choice experiment
(involving a different sample), avoiding twenty percent co-insurance (rather than being able to keep
with the current ten percent rate) was estimated to be worth eight percent of average premium.
Becker & Zweifel, supra note 146, at 35. Since going from ten percent to no co-insurance at all may
be even more highly valued, the net compensation required for the average Swiss to accept
restrictions on physician choice may amount to twenty-seven percent of average premium or even
less. See id.
152. Zweifel et al., supra note 85, at 327 tbl.3, 328, 330; The World Factbook: Switzerland,
CENT. INTELLIGENCE AGENCY, https://www.cia.gov/library/publications/the-world-factbook/geos/
sz.html (last updated Jan. 20, 2011).
153. Zweifel et al., supra note 85, at 327 tbl.3, 328.
154. See id. at 328.
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about 60% higher among individuals who were hospitalized
during the preceding year than among those who are in good
subjective health. 155 Again, similar differences in WTP
values also apply to other features of managed care.
It would evidently take higher premium discounts to make managed
care acceptable to the average Swiss citizen. Internal records provided
by a major health insurer on costs in its conventional and managed care
plans suggest that far higher discounts than those permitted would be
possible in principle. 156 However, these records also indicate that
managed care enrollees tend to switch to a conventional plan as soon as
they expect major health care expenditures. 157 Risk selection, therefore,
occurs not only on the part of insurers but on the part of consumers as
well.
V.
TENTATIVE LESSONS FROM SWISS EXPERIENCE
In the United States, many of the advocates of moving insurance
choices (and the costs of those choices, at least at the margin) to the
individual consumer have assumed that empowered and accountable
individuals would choose “cost-effective” managed care delivered by
tightly integrated health care provider networks. 158 Yet in Switzerland,
which more closely approximates this model than does the United
States, managed care has remained a small part of the market for health
coverage, and HMOs with integrated physician organizations enroll only
a minority of the small fraction of consumers who choose managed
care. 159 Empirical work reveals that this is no fluke. Swiss consumers
are willing to pay a substantial premium to maintain their choice of
outpatient health care provider. 160 In the United States, individuals with
employer-provided coverage often do not control the decision whether
or not to enroll in managed care—to a large degree, their employer
(sometimes in negotiation with their union) makes this choice for
them. 161 Most Medicaid beneficiaries also must enroll in managed care
155. Id. at 327 tbl.3, 328.
156. See id. at 330-31.
157. See Christiaan J. Lako et al., Switching Health Insurance Plans: Results from a Health
Survey, 18 HEALTH CARE ANALYSIS 6 (2010), http://www.springerlink.com/content/x304261672n
15278/fulltext.pdf.
158. Alain Enthoven, Health Care with a Few Bucks Left Over, N.Y. TIMES, Dec. 28, 2008, at
WK9.
159. See Beck, supra note 131.
160. See Iva Bolgiani et al., The Role of Health Insurance in Regulating the Swiss Health Care
System, 6 REVUE FRANÇAISE DES AFFAIRES SOCIALES 227, 234 & fig.1 (2006), http://www.cairn.
info/load_pdf.php?ID_ARTICLE=RFAS_EN606_0227.
161. See Enthoven, supra note 158 (“[M]ost employers offer workers no choice of insurance
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as a condition of coverage. 162 American political, economic, and health
policy elites embraced managed care in the 1980s and 1990s as the
supposed solution to America’s acute problems with escalating health
care costs. 163 Yet other wealthy democracies, including Switzerland,
have better track records on cost control than does the United States,
despite a much more limited use of managed care approaches. 164
Why costs seem to be easier to control in countries that do not use
the type of managed care programs seen in the United States is a
question on which the authors of this Article have somewhat different
perspectives. One of the authors (Kreier) feels that the Swiss systems of
regulated and negotiated prices, whatever their imperfections, are the
key to the comparative success of Swiss cost control. While American
managed care organizations do negotiate steep discounts in doctor,
hospital, and pharmaceutical prices relative to prices paid by other
payers, Kreier believes they have not been successful at controlling the
average level of health care prices. Instead, the fragmented negotiation
process has driven greater price variation, with different providers
receiving different rates for the same service from the same payer, and
with each individual provider receiving different rates for the same
service from different payers. The fragmentation also increases
administrative costs. Commonly, the weakest payers, including small
employers and individuals without insurance, end up paying the highest
prices. 165 Medicaid consistently pays less than either Medicare or
commercial payers. 166 Two-tier, or multi-tier, health care is already
evident in the U.S. market. Its contribution to socioeconomic disparities
in health outcomes is only likely to increase as more and better
information becomes available about provider quality.
companies.”).
162. See KAISER COMM’N ON MEDICAID & THE UNINSURED, supra note 14, at 18 (explaining
how the Medicaid Program is set up to work with the private healthcare market, and identifying that
“[i]n 2008, about 70% of Medicaid enrollees received some or all of their services through managed
care arrangements”).
163. Insurance Premiums Still Rising Faster than Inflation and Wages, N.Y. TIMES
PRESCRIPTIONS (Sept. 15, 2009, 10:00 AM), http://prescriptions.blogs.nytimes.com/2009/09/15/
insurance-premiums-still-rising-faster-than-inflation-and-wages/ (“Since the country backed away
from H.M.O-style managed care in the late 1990s, it has been without ‘a new answer to the rising
cost of health care.’”).
164. See Schwartz, supra note 4 (describing how the Swiss health care system, although based
in consumer choice, leads to lower costs than those in the United States, for the national income as a
whole, as well as for individual citizens).
165. Gina Kolata, Medical Fees Are Often Higher for Patients Without Insurance, N.Y. TIMES,
Apr. 2, 2001, at A1.
166. Stephen Zuckerman et al., Trends in Medicaid Physician Fees, 2003–2008, 28 HEALTH
AFF. w510, w510 (2009), http://content.healthaffairs.org/content/28/3/w510.full.pdf+html.
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Zweifel, on the other hand, challenges upfront the tenet that cost
concerns should be at the center of attention, arguing that consumers in
their daily lives look at cost-benefit ratios or “value for money”
(precisely what the standard textbook model of consumer choice
predicts). Therefore, policy should be designed to enable individuals to
choose plans that offer value for money, even if that entails a lot of
money. At least if under sufficient pressure of competition (and that is a
big “if” in both countries), health insurers need to act as prudent
purchasers of health care services in order to offer value for money.
According to this line of thought, Swiss managed care already makes a
contribution to improving cost-benefit ratios by offering products that
match the preferences of a (small) subset of the population. 167 It could
make an even greater contribution if it were freed from its current
constraints, including the requirement to negotiate prices with cantonal
hospital associations. As to pharmaceutical and medical device benefits
and prices, insurers are obliged to accept nationwide uniform schedules.
And most importantly, the “Buy Swiss” principle governs the basic
benefits package. This serves to protect domestic service providers and
pharmaceutical companies from international competition, which
otherwise would keep prices and qualities in line in a small country that
relies on imports for almost everything. Admittedly, insurers would have
to learn to negotiate, while antitrust authorities would have to learn to
effectively prevent collusion and market closure, both on the part of
health insurers and health care providers.
Zweifel also argues that the imposition of community rating, which
forces price (premium) to differ from marginal cost (expected future
health care expenditure), is both inefficient and unnecessary to achieve
solidarity in the context of the Swiss system of IRP subsidies. In the
absence of community rating, this means-tested subsidy scheme would
make rich but sickly persons pay their own premiums, while benefiting
citizens who are both sickly and poor, since any premium in excess of
eight percent of income would be subsidized away. However, it is at this
juncture that concerns about cost reappear. Citizens who finance the
premium subsidy through their tax payments are interested in cost
control because it keeps these subsidies low (or from rising very fast due
to medical innovation). Ultimately, one would have to measure citizens’
willingness to pay for income redistribution designed to grant the poor
access to health insurance coverage that also comprises the newest in
medical technology.
167. See supra notes 110, 112 and accompanying text.
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Some researchers have concluded that Swiss HMOs, at least, save
more on costs than the twenty-five percent discount they are allowed to
offer on premiums. 168 Perhaps if premium discount restrictions were
lifted, HMO premiums would fall relative to traditional coverage and
HMOs would garner a greater market share. But, as the FOSI has noted,
this might seriously challenge the Swiss devotion to solidarity if
enrollment became segregated along income lines, with lower income
Swiss concentrated in lower-price managed care products. 169 Whether or
not such a segregation, if it were to come to pass, would chip away at
Switzerland’s track record of low levels of health disparities is an open
question. Both authors agree that the answer depends very much on
whether the level of premium subsidization will continue to be sufficient
to permit lower income beneficiaries to enroll in a conventional plan.
We also agree that the Swiss record on health disparities should
give pause to those in the United States who believe that the expansion
of public coverage is the only way to ameliorate the condition of the
poor and working classes. The Swiss present everyone, rich or poor,
with the same menu of choices among competing health insurers, while
their system of subsidies makes coverage reasonably affordable for
everyone. Both of us agree that this approach is more egalitarian than
that of the United States, which consigns those with low incomes to a
Medicaid program that pays doctors and hospitals at rates substantially
below those paid by either Medicare or commercial insurers. 170
168. See LEU ET AL., supra note 115, at 17; Hansjörg Lehmann & Peter Zweifel, Innovation
and Risk Selection in Deregulated Social Health Insurance, 23 J. HEALTH & ECON. 997, 998 (2004).
169. See OFFICE FEDERAL DES ASSURANCES SOCIALES, supra note 41, at 65-66.
170. See Zuckerman et al., supra note 166, at w510. The ACA will increase the rates Medicaid
pays primary care doctors to match the Medicare rates, but does nothing to address disparities in
specialist and hospital fee schedules. Health Care and Education Reconciliation Act of 2010, Pub.
L. No. 111-152, § 1202(a)(1)(C), 124 Stat. 1029, 1052.